Does a regulation that fails to advance a legitimate governmental interest result in a regulatory taking?

• Author: Echeverria, John D.

1. INTRODUCTION

   The most important and controversial question in regulatory takings law today is whether a regulation that fails to advance a legitimate governmental interest results in a compensable taking under the Fifth Amendment to the United States Constitution.(1) The United States Supreme Court appears to be divided on the issue and, for the moment, is overtly undecided. How the Court ultimately resolves this question will go a long way toward determining the scope of regulatory takings doctrine.

   Those who closely follow takings developments anticipated that the Supreme Court would resolve the issue in the case of City of Monterey v. Del Monte Dunes at Monterey, Ltd. (Del Monte Dunes).(2) However, because of the odd procedural posture of the case, the Court acknowledged the importance of the issue in its May 1999 ruling, but left it for resolution in some future case.(3) Therefore, the lower federal and state courts have been left to muddle through as best they can.

   This Article asserts that, in general, the failure of a regulation to advance a legitimate governmental interest does not result in a taking. Such an action may be illegal on some other basis--for example, under the Due Process Clauses of the Fifth and Fourteenth Amendments(4)--but it is not a taking.

   The gist of the argument is as follows. The Takings Clause(5) was originally drafted to apply only to direct physical appropriations of private property for public use.(6) Since the beginning of this century, the Supreme Court has interpreted the clause to apply not only to appropriations but also to regulations that are so economically burdensome that they are equivalent to appropriations.(7) In the words of Justice Holmes, the basic issue in a regulatory takings case is whether the regulation "has very nearly the same effect for constitutional purposes as appropriating or destroying [the property]."(8) However, the purported means-ends test would introduce into takings jurisprudence a strain of analysis that is fundamentally at odds with the origins and modern understanding of the Takings Clause. By incorporating what is in essence a due process analysis, the purported means-ends takings test would expand the focus of regulatory takings doctrine from burdensome but otherwise valid government actions to arbitrary or invalid government actions, without regard to the type of economic burden they may impose. In general, this type of means-ends analysis has no logical place in regulatory takings doctrine.

   Part II of this Article describes the means-ends takings test, its background, and its current status. Part III outlines and discusses the arguments for and against the use of the means-ends takings test and contends that the arguments for rejecting its use are more persuasive. Parts IV and V analyze respectively the two recent cases of Eastern Enterprises v. Apfel(9) and Del Monte Dunes, and describe how the two cases suggest that the Supreme Court may be preparing to reject the means-ends takings test. Part VI briefly raises, but does not attempt to definitively resolve, the question of whether a failure to advance a legitimate state interest may preclude a finding of a taking. Part VII explains why, as a practical matter, it is important whether traditional due process means-ends analysis is imported into the takings doctrine. The Article concludes with the hopeful suggestion that the Supreme Court's recent takings decisions point toward the emergence of a new, more coherent regulatory takings doctrine.

2. THE MEANS-ENDS TEST IN THE TAKINGS ARENA

   The famously muddy doctrine of regulatory takings is as muddy as it gets when it comes to the question of whether the alleged failure of a regulatory action to advance a legitimate governmental interest (in shorthand, the "purported means-ends test") is really a takings test at all. More than twenty years ago, in Penn Central Transportation Co. v. New York City (Penn Central),(10) the Court stated that "a use restriction may constitute a `taking' if [it is] not reasonably necessary to the effectuation of a substantial government purpose."(11) Two years later, in Agins v. City of Tiburon,(12) the Court said essentially the same thing: a government action "effects a taking" if it "does not substantially advance legitimate state interests."(13)

   Since that pair of decisions, the Supreme Court has repeated this purported means-ends takings test in over half a dozen cases.(14) Indeed, in Nollan v. California Coastal Commission,(15) the Court (per Justice Scalia) went so far as to state that "[w]e have long recognized that ... regulation does not effect a taking if it `substantially advance[s] legitimate state interests.'"(16) Notwithstanding the visibility and longevity of the purported means-ends test, there is substantial reason to doubt that the Court really meant what it said twenty years ago, or at least, that it would say the same thing today. The Court has never squarely applied the purported means-ends test to uphold a finding that a regulatory restriction effected a taking. In Nollan and Dolan v. City of Tigard,(17) the Court relied in part on the purported means-ends test to support the conclusion that so-called exactions resulted in a taking.(18) However, for the reasons discussed below, those decisions are logically confined to their particular context and do not support the idea that the purported means-ends test provides a general test for review of regulations under the Takings Clause.(19)

   In the face of this uncertainty, the majority of lower courts that have addressed the issue over the last decade or so have rejected the idea that the purported mean-ends test represents an independent test for a regulatory taking. For example, the United States Court of Federal Claims--the federal trial court with specialized jurisdiction over most takings claims against the United States--has rejected this test. Ten years ago, Chief Judge Loren Smith of the United States Claims Court concluded that means-ends review does not represent an independent takings test, stating that "no court has ever found a taking has occurred solely because a legitimate state interest was not substantially advanced."(20)

   Many state courts that have addressed the issue have also concluded that there is no independent means-ends takings test. For example, in Brunelle v. Town of South Kingston,(21) the Rhode Island Supreme Court overruled a trial court's conclusion that "a regulatory taking can be compensable if the ordinance in question does not substantially advance a legitimate state interest," stating that "a discussion of the arbitrariness or capriciousness of a particular state action is properly examined under the light of the Fourteenth Amendment due process clause and not the Fifth Amendment takings clause."(22) Likewise, in Mission Springs, Inc. v. Feature Realty, Inc.,(23) the Washington Supreme Court held that a city's allegedly "arbitrary" and "illegal" denial of a permit stated a claim under the Due Process Clause, but not under the Takings Clause.(24) And in Tampa-Hillsborough County Expressway Authority v. AGWS Corp.,(25) the Florida Supreme Court held that an unreasonable state mapping statute was invalid under the Due Process Clause, but did not necessarily result in a compensable taking under the Takings Clause.(26)

   Over the last few years, in a pair of important cases, the Supreme Court approached but did not definitively resolve the issue of the validity of the purported means-ends takings test.(27) In Eastern Enterprises v. Apfel,(28) decided in June 1998, a bare majority of the Court, using somewhat opaque language, apparently reached the conclusion that the purported means-ends test is not in fact a takings test.(29) In that case, the Court struck down as unconstitutional the federal Coal Industry Retiree Health Benefit Act of 1992,(30) but five Justices (Justice Kennedy and the four dissenting Justices) rejected the means-ends takings claim in the case.(31) The discussion in Eastern Enterprises raised the hope that the Supreme Court would definitively resolve in Del Monte Dunes whether the purported means-ends test actually exists or not.

   The hope for guidance from the Supreme Court was short lived. In a five to four decision in May 1999, the Court in Del Monte Dunes upheld a jury finding of a taking based on jury instructions incorporating the means-ends theory.(32) But the Court did not thereby endorse the means-ends theory. Justice Kennedy, writing for the majority, and Justices Souter and Scalia, who wrote separate opinions, all concluded that the issue of the validity of the means-ends test was not properly before the Court because counsel for the city had not objected to the jury instructions and had therefore waived any right to object to the legal theory upon which the instructions were based.(33) As a result, we must continue to wait for clearer guidance from the Supreme Court on the validity of the purported means-ends test.

3. THE DEBATE

   There are substantial arguments for why the Supreme Court--and the lower federal and state courts pending a ruling by the high court--should reject the purported means-ends test as a general takings test. While there are also arguments on the other side of the issue, they are less persuasive.

   1. Arguments For Discarding the Purported Means-Ends Takings Test

      1. Due Process Test In Disguise

         The Court's apparent adoption of the purported means-ends takings test in Penn Central and Agins stemmed from an inadvertent muddling of legal doctrines. While the Court in these cases described means-ends analysis as an appropriate takings test, a careful reading of the decisions shows that the Court was actually referring to a due process test.

         In Penn Central, the Court relied upon due process, not takings, precedents to support the idea that "a use restriction may constitute a `taking' if [it is] not reasonably necessary to the effectuation of a substantial...